Goodwill and Intangible Assets

The Company has goodwill from business combinations, intangible assets from branch acquisitions, identifiable intangible assets assigned to core deposit relationships and customer lists of First Mid Insurance. The following table presents gross carrying value and accumulated amortization by major intangible asset class as of June 30, 2019 and December 31, 2018 (in thousands):



	June 30, 2019				December 31, 2018
	Gross Carrying Value		Accumulated Amortization		Gross Carrying Value		Accumulated Amortization
Goodwill not subject to amortization (effective 1/1/02)	$	108,735	$	3,760	$	109,037	$	3,760
Intangibles from branch acquisition	3,015		3,015		3,015		3,015
Core deposit intangibles	32,355		15,950		32,355		14,017
Other intangibles	16,029		3,283		16,029		2,648
	$	160,134	$	26,008	$	160,436	$	23,440

Goodwill of $26.5 million was recorded for the acquisition and merger of First Bank during 2018. All of the goodwill was assigned to the banking segment of the Company. The Company expects this goodwill will not be deductible for tax purposes. The following table provides a reconciliation of the purchase price paid for the acquisition of First Bank and the amount of goodwill recorded (in thousands):



Purchase price (in excess of net book value)				$	26,946
Purchase accounting adjustments:
Fair value of securities	$	320
Fair value of loans, net	3,463
Fair value of OREO	12
Fair value of mortgage servicing rights	(1,097		)
Fair value of premises and equipment	689
Fair value of time deposits	1,301
Fair value of FHLB advances	(328		)
Fair value of subordinated debentures	(1,451		)
Core deposit intangible	(5,224		)
Other assets and other liabilities, net	1,860
				(455		)
Resulting goodwill from acquisition				$	26,491

Goodwill of $18.6 million was provisionally recorded for the acquisition and merger of SCB during the fourth quarter of 2018. All of the goodwill was assigned to the banking segment of the Company. Goodwill was subsequently adjusted to $18.3 million to reflect proper valuation of financial assets and liabilities. The Company expects this goodwill will not be deductible for tax purposes.

The following table provides a reconciliation of the purchase price paid for the acquisition of SCB and the amount of goodwill recorded (in thousands):



Purchase price (in excess of net book value)				$	21,677
Purchase accounting adjustments:
Fair value of securities	$	41
Fair value of loans, net	3,377
Fair value of OREO	345
Fair value of premises and equipment	(953		)
Fair value of time deposits	(343		)
Fair value of FHLB advances	(29		)
Core deposit intangible	(7,269		)
Customer list intangible	(12,298		)
Other assets and other liabilities, net	13,786
				(3,343		)
Resulting goodwill from acquisition				$	18,334

During 2018, as part of the First Bank and SCB acquisitions, the Company acquired mortgage servicing rights valued at $1,558,000. There have been no mortgage servicing rights added during 2019. The following table summarizes the activity pertaining to mortgage servicing rights included in intangible assets as of June 30, 2019, June 30, 2018 and December 31, 2018 (in thousands):



	June 30, 2019			June 30, 2018			December 31, 2018
Beginning Balance	$	2,101			$844		$	844
Mortgage servicing rights acquired during period	—			425			1,558
Mortgage servicing rights capitalized	—			7			7
Valuation reserve	(439		)	—			—
Mortgage servicing rights amortized	(172		)	(119		)	(308		)
I/O Strip	146			—			—
Ending Balance	$	1,636			$1,157		$	2,101

Total amortization expense for the six months ended June 30, 2019 and 2018 was as follows (in thousands):



	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Core deposit intangibles	953		591		$	1,933	$	1,011
Customer list intangibles	317		45		635		91
Mortgage servicing rights	553		80		611		119
	$	1,823	$	716	$	3,179	$	1,221

Aggregate amortization expense for the current year and estimated amortization expense for each of the five succeeding years is shown in the table below (in thousands):



Aggregate amortization expense:
For period 01/01/19-06/30/19	$	3,179
Estimated amortization expense:
For period 07/01/19-12/31/19	2,769
For year ended 12/31/20	4,836
For year ended 12/31/21	4,192
For year ended 12/31/22	3,826
For year ended 12/31/23	3,510
For year ended 12/31/24	2,910

In accordance with the provisions of SFAS No. 142, “Goodwill and Other Intangible Assets,” codified within ASC 350, the Company performed testing of goodwill for impairment as of September 30, 2018 and determined that, as of that date, goodwill was not impaired. Management also concluded that the remaining amounts and amortization periods were appropriate for all intangible assets.